China slowdown will not derail US recovery: Biden

Bloomberg

US Vice President Joe Biden on Saturday said that the US’ economic recovery is on track even as China’s growth has slowed.

“It won’t derail it,” Biden said in a Bloomberg Television interview in Singapore. “But obviously, slowing of growth in the second-biggest economy of the world is just like if our economy slowed: It will affect the world.”

China’s GDP rose 7.5 percent in the second quarter from a year earlier, down from 7.7 percent in the previous period, extending the longest streak of under 8 percent expansion in at least two decades.

Chinese officials on Thursday ordered more than 1,400 companies in 19 industries to cut excess production capacity this year as part of efforts to shift toward slower, more sustainable economic growth.

China is the US’ biggest trading partner after Canada, with two-way trade last year reaching US$536.2 billion. Bilateral commerce favors China, with the deficit on the US side at US$315 billion last year, more than any other country.

The country is also the biggest foreign owner of US Treasuries, with its holdings rising to a record US$1.316 trillion in May, according to US Department of Treasury data.

“We’re not talking a really, really hard landing in China, we’re just talking about growth of maybe 6.5 percent rather than 7.5 percent — that absolutely will not derail US economic recovery,” Lewis added.

Biden spoke about US-China ties as he wrapped up a six-day trip of Singapore and India. He also met with Japanese Prime Minister Shinzo Abe in the city-state.

The US, Japan and Singapore are among a dozen countries working toward an agreement by the end of the year on the Trans-Pacific Partnership, a free-trade accord to link an area with about US$26 trillion in annual economic output.

“My key takeaway is there is interest and enthusiasm for enhanced trade and commerce,” Biden said in the interview, adding that the partnership offers “incredible economic promise.”

Revised data from the US Department of Commerce last month showed that the world’s largest economy grew at an annualized rate of 1.8 percent in the first quarter of the year as consumer spending climbed at a pace of 2.6 percent.

While both estimates were lower than previously calculated, US consumer spending rebounded in May and other reports showed the housing recovery is gaining momentum and consumers are becoming more confident.

“China’s slowdown is unlikely to have a meaningful impact on US growth,” CIMB Group Holdings Bhd economist Song Seng Wun (宋城煥) said in Singapore. “US growth is determined more by domestic consumption. The US has seen fairly steady growth.”

Biden also sought to ease tensions in the region on his visit, pushing China to negotiate quickly with Southeast Asian nations on a code of conduct for the South China Sea, an area he said is a “major, major, major highway of commerce.”

The US is seeking to compete with China economically, while also collaborating in areas such as the environment, Biden said.

“We see a China that’s made up of competition and cooperation,” he said. “There’s nothing inevitable about there being conflict with China.”